Preview
Theodore K. Stream, Bar I/138160
Robert L Hicks, Bar l/204992
Summer M. DeVore, Bar //323656
STREAM KIM HICKS WRAGE & ALFARO, PC
3403 Tenth Street, Suite 700
Riverside, CA 92501-3641
Telephone: (951) 783-9470
Facsimile: (951) 783-9475
Attorneys for Plaintiff,
West Valley Concrete, Inc., a California corporation
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CRUX
WFST VALLEY CONCRETE, INC., a ) CASE NO. 20CV00754
10
California corporation, )
) WEST VALLEY CONCRETE, INC.'S
Plaintiff, ) MEMORANDl)M OF POINTS AND
12 ) AUTHORITIES IN SUPPORT OF
vs. ) MOTION TO BIFURCATE
13 )
KATCH FNVIRONMENTAL, INC., a )
California corporation; PAUL )
Date: May 26, 2022
KATCHADOURIAN, an individual; and DOES Time: 8:30 a.m.
15 )
I through 107 inclusive, Dept. 5
)
16 )
Defendants. ) Filed concurrently with:
) I. Notice of Moti on and Motion to Bifurcate;
17
) 2. Declaration of Robert J. IIicks;
) 3. Request for Judicial Notice/ and
18
) 4. /Proposedj Order
19 )
) Complaint Filed: March 6, 2020
20 ) Trial Date: June 27, 2022
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24 ///
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STREAMFKIM
A I'IORN EVE A'I LAIR
340377 170 S7REIT. I
Slt.
00
RIVEI'EIRE, CA 9 301
PLAINTIFF WEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN
931 733-9470 SUPPORT OF MOTION TO BIFURCATE
MEiVIORANDUM OF POINTS AND AUTHORITIES
INTRODUCTION
Plaintiff West Valley Concrete, inc. ("WVC") brought this instant action against
Defendants Katch Fnvironmenial inc. ("Katch") and Paul Katchadourian ("Katchadourian*')'.
6 WVC submitted a subcontractor bid for concrete work to Katch for a public works project.
7 Katch listed WVC to perform the concrete work in its general contractor bid on the project.
8 Subsequently, Katch was awarded the project.
During the 5-month bid extension period, Defendants learned that there was a mistake on
10 Katch*s awarded bid. This mistake would cost Defendants to lose approximately $ 650,000 in
11 profit. Instead of informing anyone about their mistake, Defendants instead devised a fraudulent
12 scheme to recoup their lost profit, including: (I) making false statements to the awarding
13 authority of the project and WVC that Katch had always intended to self-perform certain
14 concrete work on the project, (2) hiring another subcontractor under the guise of an "employee"
15 to perform the work for which Katch had listed WVC, (3) providing a falsified bid spreadsheet to
16 Cal-DCTS that purportedly showed that Katch had always intended to self-perform the concrete
17 work after hiring the new subcontractor; and (4) ordering Katch's employee to delete the actual
18 spreadsheet.
As a result, WVC seeks the benefit of its bid had it not been wrongfully deprived of the
20 portion of the concrete work for the project as a result of Defendants'nlawful and fraudulent
21 actions. Moreover, based upon these allegations, WVC is seeking punitive damages against
22 Katch and Katchadourian, and to hold Katchadourian liable under alter ego theory.
23 Accordingly, WVC requests that the Court bifurcate this action to conduct trial on the
24 issue of whether Katch and Katchadourian are liable for committing fraud and violating the
25 Subletting and Subcontracting Fair Practices Act before the issue of punitive damages and alter
26 ego liability. Bifurcation is appropriate here because itwill promote judicial efficiency and
27 economy by deciding the threshold issue of liability before more complicated evidence regarding
28
'etch and Katchadonrian shall be jointly referred to as "Defendants".
STREAM KIM
AITORRI.YS Ai
LAR'403T7191057RLLT,
1
Sir 700 PLATNTIFF WEST VALLEY CONCRETE, FNC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN
ILIYLRSIRL,CA 92501
951-753-9470 SUPPORT OF MOTION TO BIFURCATE
I the financial condition and corporate practices of the Defendants are introduced. Additionally,
2 bifurcation will help narrow discovery for punitive damages and alter ego liability purposes by
3 limiting discovery to the scope of liability.
Because bifurcation will promote efficiency and economy and tailor discovery, WVCls
5 Motion to Bifurcate should be granted.
FACTUAL BACKGROUND
WVC original complaint against Katch included 3 causes of action: (I) Violation of the
9 Subletting and Subcontracting Fair Practices Act; (2) Fraud-Intentional Misrepresentation; and
10 (3) Fraud-Concealment. (Declaration of Robert J. Hicks, ("Hicl&s Dec.**) P 2; Request for Judicial
11 Notice ('RJN") Exhibit 1.) WVCls original complaint also sought punitive damages against
12 Katch. (Hicks Dec. g 2: RJN Exhibit I, tt'ti
50, 61, Prayer for Relief, tt'.)
13 Subsequently, WVC obtained leave from the Court to file a First Amended Complaint.
14 (Hicks Dec. gl
3.) Notably, WVC's First Amended Complaint ("FAC") includes the same 3
15 causes of action as WVC's original complaint and still seeks punitive damages from Katch.
16 (Hicks Dec. tt'; RJN Fxhibit 2.) However, unlike WVC*s original complaint, the FAC
17 includes: (I) Katchadourian, an individual, as a defendant (in addition to Katch) (FAC tt 3);(2)
18 alter ago liability as to Katchadourian and Katch (FAC it3): and (3) punitive damages against
19 Katchadourian (in addition to Katch) (FAC gtt 48, 59, Prayer for Relief, 4, 7). (Hicks Dec, tt 3:
t)tt
20 RJN Exhibit 2.)
21 Punitive Dantaaes
22 For WVC's Fraud-Intentional Misrepresentation fraud claim, WVC alleges that
23 Defendants intentionally and repeatedly represented to WVC that WVC would perform all of the
24 work included in its bid for all of the concrete work for the Santa Cruz ()nit Headquarters Auto
25 Shop ("Project*l)l despite knowing the representation was false. (FAC tt'll'1-46.) Similarly, for
26 WVC's concealment fraud claim, WVC alleges that Defendants never once discussed breaking
27 out the scope or pricing of WVC's bid and intentionally concealed from WVC that Defendants
28 intended to reduce the scope and lower the price of WVC's bid so it could allegedly self-perform
STREAMIKIM
ATIDRN ETC AT I.AIV
3403 I EN I'5 STREET, 2
STE 700
RIVER IDE, CA 93501
PLAINTIFF IVEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN
951-753-9470 SUPPORT OF MOTION TO BIFI IRCATE
I most of the work via another subcontractor in order to increase their own profit at the expense of
2 WVC. (FAC pjt'9-57.) As a direct result of Defendants'ntentional false representations and
3 concealment of material facts, WVC has been harmed. (FAC jj'jj'47, 58.)
In addition, under both fraud causes of action, WVC asserts Defendants'onduct as
5 described in the FAC "constitutes malice, oppression and fraud justifying an award of punitive
6 damages." (FAC fjt'48,59.) Thus, the issue of the amount of punitive damages to which WVC
7 may be entitled to does not rise until WVC's right to recover punitive damages has been
8 established.
Alter ERo Liabi litv
10 In addition to the two fraud claims against Katch, WVCEs FAC also includes a cause of
11 action for Violation of the Subletting and Subcontracting Fair Practices Act (the "Act*7) against
12 Katch. Iror WVC's violation of the Act claim, WVC asserts that Katch breached is statutory
13 duty by unlawfully substituting another subcontractor under the guise of being Katch's
14 employee, so that Defendants could claim that Katch was substituting itself in place of WVC to
15 perform a portion of the concrete work included in Katch's bid for the Project. (FAC jt'9.)
16 Notably, the first cause of action for violating the Act is only alleged against Katch.s
17 However, in its FAC, WVC*s contends that Katchadourian is the owner and sole officer of Katch
18 and as such, controls Katch as a mere shell, instrumentality, and conduit, so that there issuch a
19 unity of interest and ownership between Katchadourian and Katch that any individuality and
20 separateness between them has ceased, such that Katch is the alter ego of Katchadourian." (FAC
21 jt'.) Moreover, WVC alleges that "adherence to the fiction of the separate existence of Katch as
22 an entity distinct from Katchadourian would, under the particular circumstances, sanction a
23 fraud, promote injustice, and defeat the rights and equities of third parties, including [WVC]."
24 'he right under the Aci may be enforced by the subcontractor in an action for damages against the prime contract.
(R.J. Land dT Associates Const Co. v. Kteivit-Sttea(1999) 69 Cal.App.4ih 416, 421, "The fact thatthe prime
25
contractor has listeda subcontractor inthe prime contractor'sbid does noi createa contractbetween them. But
section 4107 creates a statutory duty of the prime contractor toward the subcontractor, because unless the statutory
26
exceptions are satisfied, the prime contractor ha[a] no right to substitute another subcontractor in place of'he listed
27 subcontractor; the statute subcontractor io
confers the right on the listed perform the subcontract unless statutory
grounds for a valid substitutionexist. Moreover, that riaht mav be enforced bv an action I'or damaues aaainst
28 the nrime contractor to recover the benefit of the baraain the listed subcontractor would have realized had he
not wronufullv been deprived of the subcontract." Internal citations and quotations omitted; emphasis added.)
STREAM KIM
ATTORNTTT AT I 4 W
340 I TENTH STREm 3
STE 700
RIVEEEIOE,CA 92 01
PLAINTIFF WEST VALLEY CONCRETE. INC.'S MEMORANDUM OF POINTS AND AUTI-IORITIES IN
9"1-733-9470 SUPPORT OF MOTION TO BIFURCATE
3907021
WITRT/003
I (FAC 103.) But the issue of alter ego liability as to Katchadourian does not rise until there has
2 been a determination of liability and damages for violation of the Act and/or fraud (intentional
3 misrepresentation or concealment) as to Katch.
Accordingly, WVC moves to bifurcate trial into hvo phases: (I) liability: and (2) the
5 amount of punitive damages and alter ego liability. Moreover, WVC*s request that after WVC's
6 right to recover punitive damages and Katchls liability is established (Phase One of trial)E the
7 Court allow discovery as to punitive damages and alter ego liability (Phase Two of trial).
ARGUMENT
10 A. The Court has broad discretion to bifurcate and separately try issues,
such liability and damages.
12 Trial courts have broad discretion in determining whether issues should be bifurcated and
13 separately tried. (Grappo v. Coventry Financial Corporation (1991) 235 Cal.App.3d 496, 504).
14 Pursuant to Code of Civil Procedure section 598, the court is authorized, "when the convenience
15 of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would
16 be promoted," to make an order 'that the trial of any issue or any part thereof shall precede the
17 trial of any other issue or any part thereof in the case, except for special defenses which may be
18 tried first pursuant to Sections 597 and 597.5." (Civ. Proc. Code ) 598.)
19 Additionally, the court, "in furtherance of'onvenience or to avoid prejudice, or when
20 separate trials will be conducive to expedition and economy, may order a separate trial of any
21 cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue
22 or of any number of causes of action or issues." (Civ. Proc. Code $ 1048.)
23 Based on these authorities, the Court has broad discretion to bifurcate the issue of
24 whether Defendants are liable for a violation of the Subletting and Subcontracting Fair Practices
25 Act, Fraud-Intentional Misrepresentation, and Fraud-Concealment from the issue of punitive
26 damages and alter ego liability. Further, judicial economy and efficiency will be promoted by
27 trying the threshold issue of liability and right to recover punitive damages before litigating the
28 issue of the amount of punitive damages against Katch and Katchadourian and alter ego liability
STREAM~KIM
A'I I DEN 095 AT LAN
-403 TENTH 5TEEE7, 4
5'IE 700
EIVEEEIDE, CA 9 501
PLAINTIFF WFST VALLEY CONCRETE, INC.'S MFMORANDUM OF POINTS AND AUTHORITIES IN
953 753 9470 SUPPORT OF 'vlOTION TO BIFURCATE
VIEE '003-3'30703
I
I as to Katchadourian on behalf of Katch. Thus, the Court should grant WVC's Motion to
2 Bifurcate.
B. Bifurcation as to liability aud damages issues is appropriate to promote
judicial economy and efficiency.
Judicial economy and efficiency would be promoted if trialon liability and damages are
6 separated because the threshold issue of liability would be resolved first. Any evidence for
7 punitive damages and/or alter ago liability will not be necessary if one or more Defendants are
8 not held liable.
In enacting Code of Civil Procedure section 598, the Legislature's objective was to avoid
10 the waste of time and money caused by the unnecessary trial of damage questions in cases where
11 the liability issue is resolved against the plaintiff. (Bor/on v. Jones (1972), 26 Cal. App. 3d 952,
12 955).
13 Here, WVC seeks separate trials on liability on its First Amended Complaint, punitive
14 damages, and alter ego liability in tv o phases. In the first phase, WVC seeks to prove: I) Katch,
15 as prime contractor, substituted WVC for another subcontractor under the guise of an
16 "employee" to perform subcontractor work in violation of the Subletting and Subcontracting Fair
17 Practices Act (Public Contract Code Section 4100, et seq.), 2) Katch and Katchadourian
18 intentionally made false representations to WVC that WVC relied in to its detriment; and 3)
19 Katch and Katchadourian deceived WVC by intentionally concealing their intent to break out the
20 scope and price of WVC's bid and substitute itself to perform some of the concrete work.
21 In the second phase, WVC will seek to prove: I) the amount of punitive damages, and 2)
22 alter ego liability. During Phase Two, WVC will introduce evidence to determine the amount of
23 punitive damages. (Civ. Code Ij3294(a); (Baiikhead v. ArvinMeritor, Inc. (2012), 205 Cal. App.
24 4th 68, 78) (Calculation of punitive damages involves a fluid process of adding or subtracting
25 depending on the nature of the acts and the effect on the parties and the worth of the defendants.)
26 Importantly, Phase Two only becomes necessary after Defendants'iability has been
27 established. In other words, the issue of the amount of punitive damages to which WVC may be
28 entitled to does not rise until WVC's right to recover punitive damages has been established.
STREAM KIM
ATTORNETE A7 F.AN
3403 TENTN 57RFET, 5
5TE 700
RIFFREIDF, CA 92501
PLAINTIFF WEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POI'NTS AND AUTHORITIES IN
951-73 -9470 SUPPORT OF MOTION TO BIFURCATE
1 Likewise, the issue of alter ego liabilityas to Katchadourian does not rise until there has been a
2 determination of liability and damages for violation of the Act and/or fraud (intentional
3 misrepresentation or concealment) as to Katch.
Accordingly, trial on the issue of liability should precede trial on the issue of punitive
5 damages and alter ego liability in order to promote judicial economy and efficiency.
C. Bifurcation will be conducive to an orderly and efficient case by allowing
WVC to conduct discovery for punitive damages and alter ego theory
following trial on liability.
WVC must be able to conduct discovery of Defendants'inancial condition to pursue
10 punitive damages. The measure of punitive damages requires, in part, evidence of a defendant*s
11 wealth. (Bankhead v. ArvtnMeritorF Inc. (2012), 205 Cal. App. 4th 68, 78). But pre-trial
12 discovery of defendants'inancial condition and profits is generally limited. (Civ. Code fI
13 3295(c).) In addition, a trial court may "preclude the admission of evidence of that defendant's
14 profits or financial condition until after the trier of fact returns a verdict for plaintiff awarding
15 actual damages and finds that a defendant is guilty of malice, oppression, or fraud in accordance
16 with Section 3294." (Civ. Code O'I3295(d).) The purpose behind this statute is to "minimize
17 prejudice prior to the jury's determination of a prima facie case of liability for punitive damages."
18 (Notrica v.State Comp. Ins. I'und (1999), 70 Cal. App. 4th 911, 939).
19 Thus, in order to seek the full scope of damages available to WVC, there must be a
20 discovery of Katch and Katchadourian's wealth after they are held liable for fraud. (SeeI Soto v.
21 Borg%amer Morse TEC Inc. (2015), 239 Cal. App. 4th 165E 193) (plaintiffs may wait until
22 liability is established before seeking financial condition information).
23 Similarly, WVC must be able to conduct discovery into Katchadourian's disregard for
24 Katch as a corporate entity. Specifically, to hold Katchadourian liable for Katch, WVC requires
25 evidence of a "unity of interest and ownership tliat the separate personalities of the corporation
26 and the individual no longer exist" and that maintaining the separate personalities would sanction
27 fraud or promote injustice. (Meeter v. Bragg Mgmt. Co. (1985), 39 Cal. 3d 290, 300). Therefore,
28 in order to establish alter ego liability, WVC will also need to conduct discovery as to
STREAM KIM
ATTORRFTE AT 1 AFI
340 TE ITH STREET, 6
STE 00 PLAINTIFF WEST VALLEY CONCRETE, INC.*S MEMORANDUM OF POINTS ANFD AUTHORITIES IN
RITEREIHE, CA 92501
951- 53-9470 SUPPORT OF MOTION TO BIFURCATE
W I Enl003 - 390302
I
I Katchadourian's disregard for the corporate entity.
Bifurcation would be efficient by focusing discovery into financial condition and alter
3 ego activity of Katch and Katchadourian only after they are held liable for WVC's claims. Thus,
4 a balance between WVC*s need for discovery and Defendants'rivacy rights prior to WVC
5 establishing Defendants'iability. Moreover, by conducting trial on the issue of liability before
6 the issue of punitive damages and alter ego liability, discovery and proof related to punitive
7 damages and alter ego will be tailored for Phase Two. Accordingly, the Court should grant
8 WVC(s Motion to Bifurcate.
IV.
10 CONCLUSION
To promote judicial efficiency and economy, and to tailor discovery, WVC respectfully
12 requests that the Court bifurcate this case into two separate phases. In Phase One, the Court
13 should try the issue of Defendants'iability on the claims set forth in WVC(s First Amended
14 Complaint. Thereafter, in Phase Two, the Court can try the issue of the amount of punitive
15 damages and alter ego liability based upon the outcome of Phase One. Accordingly, WVC
16 respectfully requests that the Court grant WVC's Motion for Bifurcation.
17
18 Respectfully submitted,
19 STREAM KIM HICKS WRAGE k ALFARO, PC
20
21
Dated: May 2, 2022
22 Theodore K. Stream
Robert J. Hicks
23 Summer M. DeVore
Attorneys for Plaintiff,
24 West Valley Concrete, Inc, a California
corporation
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STREAM KIM
AITITRNIT( AI LAIT
3903TINTNSIRIIT, 7
515 700
51950510L CA 92501
PLAINTIFF WEST VALLEY CONCRETF., INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN
93153-9170 SUPPORT OF MOTION TO BIFURCATE
PROOF OF SERVICE
STATE OF CALIFORNIA, COUNTY OF RIVERSIDE
Re: West Valley Concrete, /nc., vs. Katch Environmental, /nc., et al.
Santa Cruz Superior Court Case Noc 20CV00754
I am employed in the County of Riverside, State of California. I am over the age of 18
years and not a party to the within action; my business address is: 3403 Tenth Street„Suite 700,
Riverside, CA 92501-3641. On May 2, 2022, I served copies of the within documents described
as WEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF MOTION TO BIFURCATE on the interested parties in
this action in a sealed envelope addressed as follows:
See attached Service List
P BY MAIL
correspondence
- I am
for
"readily
mailing.
familiar"
Under
with
that
the firm's
practice, it
practice
would be
of collecting
deposited
and
with
processing
the United
10 States Postal Service on the same day in the ordinary course of business, with postage
thereon fully prepaid at Riverside, California. I am aware that on motion of the party
served, service is presumed invalid if postal cancellation date or postage meter date is more
than one day after date of deposit for mailing in affidavit.
12
BY CM/ECF SYSTEM - I hereby ceitify that I electronically transmitted the attached
13 document to the Clerk's Office using the CM/ECF System for filing and transmittal of a
Notice of Electronic Filing to the FCF registrants listed on the attached Service List.
14
BY PERSONAL SERVICE - I caused such envelope to be delivered by hand to the offices
15 of the addressee pursuant to C.C.P. Ft1011.
16 BY EXPRESS MAIL/OVERNIGHT DELIVERY - I caused such envelope to be
delivered by hand to the office of the addressee via overnight delivery pursuant to
17 C.C.P. $ 1013(c), with delivery fees fully prepaid or provided for.
18 BY FACSIMILE - Icaused such document to be delivered to the office of the addressee
via facsimile machine pursuant to C.C.P. $ 1013(e). Said document was transmitted to the
19 facsimile number of the office of the addressee from the office of Stream Kim Hicks Wrage
k. Alfaro, PC, in Riverside. California, on the date set forth above. The facsimile machine I
20 used complied with California Rules of Court, Rule 2003(3) and no error was reported by
the machine. Pursuant to California /Iules of Cottrt, Rule 2009(i), I caused the machine to
21 print a record of the transmittal, a copy of which is attached to this declaration.
22 X BY ELECTRONIC/EMAIL - I caused such document to be delivered to the office of the
addressee via electronic e-mail pursuant to C.C.P. )1013(a). Said document was transmitted
23 to the email address of that office which is listed on the above Service List. Said document
was served electronically and the transmission was reported as complete and without error.
24
I declare under penalty of perjury under the laws of the State of California that the
25 foregoing is true and correct.
26 t
Executed on 2022, at Riverside, California.
-'(
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27 . 5,:»
28
STREAM;KIM
AITORNLYE AT LAIL
3403TENIN SIREI'I,
STE 700
I
CA 9 507
RIEL'ILRIEE,
951-733-9470
PROOF OF SERVICE
SERVICE LIST
Re: IVest Valley Concrete, Inc., vs. Latch Environmental, Inc.. et al.
Santa Cruz Superior Court Case No.: 20CV00754
Matthew W. Quail Attorneys for Defendant,
Matthew R. Dardenne KATCH ENVIRONMENTAL
Quail Cardot LLP INC., a California corporation;
205 E. River Park Circle, Suite 110 PAUL KATCHADOURIAN
Fresno, California 93720
~rn uall0afuuallcardot.corn
mdardenne,caquallcardot.corn
Telephone: (559) 418-0333
Facsimile: (559) 418-0330
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95'I 753-94 0
PROOF OF SFRVICE
390 02
WI 595 003 I
Preview
Theodore K. Stream, Bar I/138160 Robert L Hicks, Bar l/204992 Summer M. DeVore, Bar //323656 STREAM KIM HICKS WRAGE & ALFARO, PC 3403 Tenth Street, Suite 700 Riverside, CA 92501-3641 Telephone: (951) 783-9470 Facsimile: (951) 783-9475 Attorneys for Plaintiff, West Valley Concrete, Inc., a California corporation SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CRUX WFST VALLEY CONCRETE, INC., a ) CASE NO. 20CV00754 10 California corporation, ) ) WEST VALLEY CONCRETE, INC.'S Plaintiff, ) MEMORANDl)M OF POINTS AND 12 ) AUTHORITIES IN SUPPORT OF vs. ) MOTION TO BIFURCATE 13 ) KATCH FNVIRONMENTAL, INC., a ) California corporation; PAUL ) Date: May 26, 2022 KATCHADOURIAN, an individual; and DOES Time: 8:30 a.m. 15 ) I through 107 inclusive, Dept. 5 ) 16 ) Defendants. ) Filed concurrently with: ) I. Notice of Moti on and Motion to Bifurcate; 17 ) 2. Declaration of Robert J. IIicks; ) 3. Request for Judicial Notice/ and 18 ) 4. /Proposedj Order 19 ) ) Complaint Filed: March 6, 2020 20 ) Trial Date: June 27, 2022 2I /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// STREAMFKIM A I'IORN EVE A'I LAIR 340377 170 S7REIT. I Slt. 00 RIVEI'EIRE, CA 9 301 PLAINTIFF WEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN 931 733-9470 SUPPORT OF MOTION TO BIFURCATE MEiVIORANDUM OF POINTS AND AUTHORITIES INTRODUCTION Plaintiff West Valley Concrete, inc. ("WVC") brought this instant action against Defendants Katch Fnvironmenial inc. ("Katch") and Paul Katchadourian ("Katchadourian*')'. 6 WVC submitted a subcontractor bid for concrete work to Katch for a public works project. 7 Katch listed WVC to perform the concrete work in its general contractor bid on the project. 8 Subsequently, Katch was awarded the project. During the 5-month bid extension period, Defendants learned that there was a mistake on 10 Katch*s awarded bid. This mistake would cost Defendants to lose approximately $ 650,000 in 11 profit. Instead of informing anyone about their mistake, Defendants instead devised a fraudulent 12 scheme to recoup their lost profit, including: (I) making false statements to the awarding 13 authority of the project and WVC that Katch had always intended to self-perform certain 14 concrete work on the project, (2) hiring another subcontractor under the guise of an "employee" 15 to perform the work for which Katch had listed WVC, (3) providing a falsified bid spreadsheet to 16 Cal-DCTS that purportedly showed that Katch had always intended to self-perform the concrete 17 work after hiring the new subcontractor; and (4) ordering Katch's employee to delete the actual 18 spreadsheet. As a result, WVC seeks the benefit of its bid had it not been wrongfully deprived of the 20 portion of the concrete work for the project as a result of Defendants'nlawful and fraudulent 21 actions. Moreover, based upon these allegations, WVC is seeking punitive damages against 22 Katch and Katchadourian, and to hold Katchadourian liable under alter ego theory. 23 Accordingly, WVC requests that the Court bifurcate this action to conduct trial on the 24 issue of whether Katch and Katchadourian are liable for committing fraud and violating the 25 Subletting and Subcontracting Fair Practices Act before the issue of punitive damages and alter 26 ego liability. Bifurcation is appropriate here because itwill promote judicial efficiency and 27 economy by deciding the threshold issue of liability before more complicated evidence regarding 28 'etch and Katchadonrian shall be jointly referred to as "Defendants". STREAM KIM AITORRI.YS Ai LAR'403T7191057RLLT, 1 Sir 700 PLATNTIFF WEST VALLEY CONCRETE, FNC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN ILIYLRSIRL,CA 92501 951-753-9470 SUPPORT OF MOTION TO BIFURCATE I the financial condition and corporate practices of the Defendants are introduced. Additionally, 2 bifurcation will help narrow discovery for punitive damages and alter ego liability purposes by 3 limiting discovery to the scope of liability. Because bifurcation will promote efficiency and economy and tailor discovery, WVCls 5 Motion to Bifurcate should be granted. FACTUAL BACKGROUND WVC original complaint against Katch included 3 causes of action: (I) Violation of the 9 Subletting and Subcontracting Fair Practices Act; (2) Fraud-Intentional Misrepresentation; and 10 (3) Fraud-Concealment. (Declaration of Robert J. Hicks, ("Hicl&s Dec.**) P 2; Request for Judicial 11 Notice ('RJN") Exhibit 1.) WVCls original complaint also sought punitive damages against 12 Katch. (Hicks Dec. g 2: RJN Exhibit I, tt'ti 50, 61, Prayer for Relief, tt'.) 13 Subsequently, WVC obtained leave from the Court to file a First Amended Complaint. 14 (Hicks Dec. gl 3.) Notably, WVC's First Amended Complaint ("FAC") includes the same 3 15 causes of action as WVC's original complaint and still seeks punitive damages from Katch. 16 (Hicks Dec. tt'; RJN Fxhibit 2.) However, unlike WVC*s original complaint, the FAC 17 includes: (I) Katchadourian, an individual, as a defendant (in addition to Katch) (FAC tt 3);(2) 18 alter ago liability as to Katchadourian and Katch (FAC it3): and (3) punitive damages against 19 Katchadourian (in addition to Katch) (FAC gtt 48, 59, Prayer for Relief, 4, 7). (Hicks Dec, tt 3: t)tt 20 RJN Exhibit 2.) 21 Punitive Dantaaes 22 For WVC's Fraud-Intentional Misrepresentation fraud claim, WVC alleges that 23 Defendants intentionally and repeatedly represented to WVC that WVC would perform all of the 24 work included in its bid for all of the concrete work for the Santa Cruz ()nit Headquarters Auto 25 Shop ("Project*l)l despite knowing the representation was false. (FAC tt'll'1-46.) Similarly, for 26 WVC's concealment fraud claim, WVC alleges that Defendants never once discussed breaking 27 out the scope or pricing of WVC's bid and intentionally concealed from WVC that Defendants 28 intended to reduce the scope and lower the price of WVC's bid so it could allegedly self-perform STREAMIKIM ATIDRN ETC AT I.AIV 3403 I EN I'5 STREET, 2 STE 700 RIVER IDE, CA 93501 PLAINTIFF IVEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN 951-753-9470 SUPPORT OF MOTION TO BIFI IRCATE I most of the work via another subcontractor in order to increase their own profit at the expense of 2 WVC. (FAC pjt'9-57.) As a direct result of Defendants'ntentional false representations and 3 concealment of material facts, WVC has been harmed. (FAC jj'jj'47, 58.) In addition, under both fraud causes of action, WVC asserts Defendants'onduct as 5 described in the FAC "constitutes malice, oppression and fraud justifying an award of punitive 6 damages." (FAC fjt'48,59.) Thus, the issue of the amount of punitive damages to which WVC 7 may be entitled to does not rise until WVC's right to recover punitive damages has been 8 established. Alter ERo Liabi litv 10 In addition to the two fraud claims against Katch, WVCEs FAC also includes a cause of 11 action for Violation of the Subletting and Subcontracting Fair Practices Act (the "Act*7) against 12 Katch. Iror WVC's violation of the Act claim, WVC asserts that Katch breached is statutory 13 duty by unlawfully substituting another subcontractor under the guise of being Katch's 14 employee, so that Defendants could claim that Katch was substituting itself in place of WVC to 15 perform a portion of the concrete work included in Katch's bid for the Project. (FAC jt'9.) 16 Notably, the first cause of action for violating the Act is only alleged against Katch.s 17 However, in its FAC, WVC*s contends that Katchadourian is the owner and sole officer of Katch 18 and as such, controls Katch as a mere shell, instrumentality, and conduit, so that there issuch a 19 unity of interest and ownership between Katchadourian and Katch that any individuality and 20 separateness between them has ceased, such that Katch is the alter ego of Katchadourian." (FAC 21 jt'.) Moreover, WVC alleges that "adherence to the fiction of the separate existence of Katch as 22 an entity distinct from Katchadourian would, under the particular circumstances, sanction a 23 fraud, promote injustice, and defeat the rights and equities of third parties, including [WVC]." 24 'he right under the Aci may be enforced by the subcontractor in an action for damages against the prime contract. (R.J. Land dT Associates Const Co. v. Kteivit-Sttea(1999) 69 Cal.App.4ih 416, 421, "The fact thatthe prime 25 contractor has listeda subcontractor inthe prime contractor'sbid does noi createa contractbetween them. But section 4107 creates a statutory duty of the prime contractor toward the subcontractor, because unless the statutory 26 exceptions are satisfied, the prime contractor ha[a] no right to substitute another subcontractor in place of'he listed 27 subcontractor; the statute subcontractor io confers the right on the listed perform the subcontract unless statutory grounds for a valid substitutionexist. Moreover, that riaht mav be enforced bv an action I'or damaues aaainst 28 the nrime contractor to recover the benefit of the baraain the listed subcontractor would have realized had he not wronufullv been deprived of the subcontract." Internal citations and quotations omitted; emphasis added.) STREAM KIM ATTORNTTT AT I 4 W 340 I TENTH STREm 3 STE 700 RIVEEEIOE,CA 92 01 PLAINTIFF WEST VALLEY CONCRETE. INC.'S MEMORANDUM OF POINTS AND AUTI-IORITIES IN 9"1-733-9470 SUPPORT OF MOTION TO BIFURCATE 3907021 WITRT/003 I (FAC 103.) But the issue of alter ego liability as to Katchadourian does not rise until there has 2 been a determination of liability and damages for violation of the Act and/or fraud (intentional 3 misrepresentation or concealment) as to Katch. Accordingly, WVC moves to bifurcate trial into hvo phases: (I) liability: and (2) the 5 amount of punitive damages and alter ego liability. Moreover, WVC*s request that after WVC's 6 right to recover punitive damages and Katchls liability is established (Phase One of trial)E the 7 Court allow discovery as to punitive damages and alter ego liability (Phase Two of trial). ARGUMENT 10 A. The Court has broad discretion to bifurcate and separately try issues, such liability and damages. 12 Trial courts have broad discretion in determining whether issues should be bifurcated and 13 separately tried. (Grappo v. Coventry Financial Corporation (1991) 235 Cal.App.3d 496, 504). 14 Pursuant to Code of Civil Procedure section 598, the court is authorized, "when the convenience 15 of witnesses, the ends of justice, or the economy and efficiency of handling the litigation would 16 be promoted," to make an order 'that the trial of any issue or any part thereof shall precede the 17 trial of any other issue or any part thereof in the case, except for special defenses which may be 18 tried first pursuant to Sections 597 and 597.5." (Civ. Proc. Code ) 598.) 19 Additionally, the court, "in furtherance of'onvenience or to avoid prejudice, or when 20 separate trials will be conducive to expedition and economy, may order a separate trial of any 21 cause of action, including a cause of action asserted in a cross-complaint, or of any separate issue 22 or of any number of causes of action or issues." (Civ. Proc. Code $ 1048.) 23 Based on these authorities, the Court has broad discretion to bifurcate the issue of 24 whether Defendants are liable for a violation of the Subletting and Subcontracting Fair Practices 25 Act, Fraud-Intentional Misrepresentation, and Fraud-Concealment from the issue of punitive 26 damages and alter ego liability. Further, judicial economy and efficiency will be promoted by 27 trying the threshold issue of liability and right to recover punitive damages before litigating the 28 issue of the amount of punitive damages against Katch and Katchadourian and alter ego liability STREAM~KIM A'I I DEN 095 AT LAN -403 TENTH 5TEEE7, 4 5'IE 700 EIVEEEIDE, CA 9 501 PLAINTIFF WFST VALLEY CONCRETE, INC.'S MFMORANDUM OF POINTS AND AUTHORITIES IN 953 753 9470 SUPPORT OF 'vlOTION TO BIFURCATE VIEE '003-3'30703 I I as to Katchadourian on behalf of Katch. Thus, the Court should grant WVC's Motion to 2 Bifurcate. B. Bifurcation as to liability aud damages issues is appropriate to promote judicial economy and efficiency. Judicial economy and efficiency would be promoted if trialon liability and damages are 6 separated because the threshold issue of liability would be resolved first. Any evidence for 7 punitive damages and/or alter ago liability will not be necessary if one or more Defendants are 8 not held liable. In enacting Code of Civil Procedure section 598, the Legislature's objective was to avoid 10 the waste of time and money caused by the unnecessary trial of damage questions in cases where 11 the liability issue is resolved against the plaintiff. (Bor/on v. Jones (1972), 26 Cal. App. 3d 952, 12 955). 13 Here, WVC seeks separate trials on liability on its First Amended Complaint, punitive 14 damages, and alter ego liability in tv o phases. In the first phase, WVC seeks to prove: I) Katch, 15 as prime contractor, substituted WVC for another subcontractor under the guise of an 16 "employee" to perform subcontractor work in violation of the Subletting and Subcontracting Fair 17 Practices Act (Public Contract Code Section 4100, et seq.), 2) Katch and Katchadourian 18 intentionally made false representations to WVC that WVC relied in to its detriment; and 3) 19 Katch and Katchadourian deceived WVC by intentionally concealing their intent to break out the 20 scope and price of WVC's bid and substitute itself to perform some of the concrete work. 21 In the second phase, WVC will seek to prove: I) the amount of punitive damages, and 2) 22 alter ego liability. During Phase Two, WVC will introduce evidence to determine the amount of 23 punitive damages. (Civ. Code Ij3294(a); (Baiikhead v. ArvinMeritor, Inc. (2012), 205 Cal. App. 24 4th 68, 78) (Calculation of punitive damages involves a fluid process of adding or subtracting 25 depending on the nature of the acts and the effect on the parties and the worth of the defendants.) 26 Importantly, Phase Two only becomes necessary after Defendants'iability has been 27 established. In other words, the issue of the amount of punitive damages to which WVC may be 28 entitled to does not rise until WVC's right to recover punitive damages has been established. STREAM KIM ATTORNETE A7 F.AN 3403 TENTN 57RFET, 5 5TE 700 RIFFREIDF, CA 92501 PLAINTIFF WEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POI'NTS AND AUTHORITIES IN 951-73 -9470 SUPPORT OF MOTION TO BIFURCATE 1 Likewise, the issue of alter ego liabilityas to Katchadourian does not rise until there has been a 2 determination of liability and damages for violation of the Act and/or fraud (intentional 3 misrepresentation or concealment) as to Katch. Accordingly, trial on the issue of liability should precede trial on the issue of punitive 5 damages and alter ego liability in order to promote judicial economy and efficiency. C. Bifurcation will be conducive to an orderly and efficient case by allowing WVC to conduct discovery for punitive damages and alter ego theory following trial on liability. WVC must be able to conduct discovery of Defendants'inancial condition to pursue 10 punitive damages. The measure of punitive damages requires, in part, evidence of a defendant*s 11 wealth. (Bankhead v. ArvtnMeritorF Inc. (2012), 205 Cal. App. 4th 68, 78). But pre-trial 12 discovery of defendants'inancial condition and profits is generally limited. (Civ. Code fI 13 3295(c).) In addition, a trial court may "preclude the admission of evidence of that defendant's 14 profits or financial condition until after the trier of fact returns a verdict for plaintiff awarding 15 actual damages and finds that a defendant is guilty of malice, oppression, or fraud in accordance 16 with Section 3294." (Civ. Code O'I3295(d).) The purpose behind this statute is to "minimize 17 prejudice prior to the jury's determination of a prima facie case of liability for punitive damages." 18 (Notrica v.State Comp. Ins. I'und (1999), 70 Cal. App. 4th 911, 939). 19 Thus, in order to seek the full scope of damages available to WVC, there must be a 20 discovery of Katch and Katchadourian's wealth after they are held liable for fraud. (SeeI Soto v. 21 Borg%amer Morse TEC Inc. (2015), 239 Cal. App. 4th 165E 193) (plaintiffs may wait until 22 liability is established before seeking financial condition information). 23 Similarly, WVC must be able to conduct discovery into Katchadourian's disregard for 24 Katch as a corporate entity. Specifically, to hold Katchadourian liable for Katch, WVC requires 25 evidence of a "unity of interest and ownership tliat the separate personalities of the corporation 26 and the individual no longer exist" and that maintaining the separate personalities would sanction 27 fraud or promote injustice. (Meeter v. Bragg Mgmt. Co. (1985), 39 Cal. 3d 290, 300). Therefore, 28 in order to establish alter ego liability, WVC will also need to conduct discovery as to STREAM KIM ATTORRFTE AT 1 AFI 340 TE ITH STREET, 6 STE 00 PLAINTIFF WEST VALLEY CONCRETE, INC.*S MEMORANDUM OF POINTS ANFD AUTHORITIES IN RITEREIHE, CA 92501 951- 53-9470 SUPPORT OF MOTION TO BIFURCATE W I Enl003 - 390302 I I Katchadourian's disregard for the corporate entity. Bifurcation would be efficient by focusing discovery into financial condition and alter 3 ego activity of Katch and Katchadourian only after they are held liable for WVC's claims. Thus, 4 a balance between WVC*s need for discovery and Defendants'rivacy rights prior to WVC 5 establishing Defendants'iability. Moreover, by conducting trial on the issue of liability before 6 the issue of punitive damages and alter ego liability, discovery and proof related to punitive 7 damages and alter ego will be tailored for Phase Two. Accordingly, the Court should grant 8 WVC(s Motion to Bifurcate. IV. 10 CONCLUSION To promote judicial efficiency and economy, and to tailor discovery, WVC respectfully 12 requests that the Court bifurcate this case into two separate phases. In Phase One, the Court 13 should try the issue of Defendants'iability on the claims set forth in WVC(s First Amended 14 Complaint. Thereafter, in Phase Two, the Court can try the issue of the amount of punitive 15 damages and alter ego liability based upon the outcome of Phase One. Accordingly, WVC 16 respectfully requests that the Court grant WVC's Motion for Bifurcation. 17 18 Respectfully submitted, 19 STREAM KIM HICKS WRAGE k ALFARO, PC 20 21 Dated: May 2, 2022 22 Theodore K. Stream Robert J. Hicks 23 Summer M. DeVore Attorneys for Plaintiff, 24 West Valley Concrete, Inc, a California corporation 25 26 27 28 STREAM KIM AITITRNIT( AI LAIT 3903TINTNSIRIIT, 7 515 700 51950510L CA 92501 PLAINTIFF WEST VALLEY CONCRETF., INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN 93153-9170 SUPPORT OF MOTION TO BIFURCATE PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF RIVERSIDE Re: West Valley Concrete, /nc., vs. Katch Environmental, /nc., et al. Santa Cruz Superior Court Case Noc 20CV00754 I am employed in the County of Riverside, State of California. I am over the age of 18 years and not a party to the within action; my business address is: 3403 Tenth Street„Suite 700, Riverside, CA 92501-3641. On May 2, 2022, I served copies of the within documents described as WEST VALLEY CONCRETE, INC.'S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO BIFURCATE on the interested parties in this action in a sealed envelope addressed as follows: See attached Service List P BY MAIL correspondence - I am for "readily mailing. familiar" Under with that the firm's practice, it practice would be of collecting deposited and with processing the United 10 States Postal Service on the same day in the ordinary course of business, with postage thereon fully prepaid at Riverside, California. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. 12 BY CM/ECF SYSTEM - I hereby ceitify that I electronically transmitted the attached 13 document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the FCF registrants listed on the attached Service List. 14 BY PERSONAL SERVICE - I caused such envelope to be delivered by hand to the offices 15 of the addressee pursuant to C.C.P. Ft1011. 16 BY EXPRESS MAIL/OVERNIGHT DELIVERY - I caused such envelope to be delivered by hand to the office of the addressee via overnight delivery pursuant to 17 C.C.P. $ 1013(c), with delivery fees fully prepaid or provided for. 18 BY FACSIMILE - Icaused such document to be delivered to the office of the addressee via facsimile machine pursuant to C.C.P. $ 1013(e). Said document was transmitted to the 19 facsimile number of the office of the addressee from the office of Stream Kim Hicks Wrage k. Alfaro, PC, in Riverside. California, on the date set forth above. The facsimile machine I 20 used complied with California Rules of Court, Rule 2003(3) and no error was reported by the machine. Pursuant to California /Iules of Cottrt, Rule 2009(i), I caused the machine to 21 print a record of the transmittal, a copy of which is attached to this declaration. 22 X BY ELECTRONIC/EMAIL - I caused such document to be delivered to the office of the addressee via electronic e-mail pursuant to C.C.P. )1013(a). Said document was transmitted 23 to the email address of that office which is listed on the above Service List. Said document was served electronically and the transmission was reported as complete and without error. 24 I declare under penalty of perjury under the laws of the State of California that the 25 foregoing is true and correct. 26 t Executed on 2022, at Riverside, California. -'( iVIay 2, g» 27 . 5,:» 28 STREAM;KIM AITORNLYE AT LAIL 3403TENIN SIREI'I, STE 700 I CA 9 507 RIEL'ILRIEE, 951-733-9470 PROOF OF SERVICE SERVICE LIST Re: IVest Valley Concrete, Inc., vs. Latch Environmental, Inc.. et al. Santa Cruz Superior Court Case No.: 20CV00754 Matthew W. Quail Attorneys for Defendant, Matthew R. Dardenne KATCH ENVIRONMENTAL Quail Cardot LLP INC., a California corporation; 205 E. River Park Circle, Suite 110 PAUL KATCHADOURIAN Fresno, California 93720 ~rn uall0afuuallcardot.corn mdardenne,caquallcardot.corn Telephone: (559) 418-0333 Facsimile: (559) 418-0330 10 12 13 14 15 17 19 20 21 22 23 24 25 26 28 STREAM Kl M AITOR 0YF A FLAW'403 TF NI ~ STR F F7, STF 700 2 iffvf'ITFF00,CA 9 503 95'I 753-94 0 PROOF OF SFRVICE 390 02 WI 595 003 I